Correlation Between Africa Oil and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Africa Oil and Dow Jones at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Africa Oil and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Africa Oil Corp and Dow Jones Industrial, you can compare the effects of market volatilities on Africa Oil and Dow Jones and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Africa Oil with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Africa Oil and Dow Jones.
Diversification Opportunities for Africa Oil and Dow Jones
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between Africa and Dow is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Africa Oil Corp and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial and Africa Oil is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Africa Oil Corp are associated (or correlated) with Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Africa Oil i.e., Africa Oil and Dow Jones go up and down completely randomly.
Pair Corralation between Africa Oil and Dow Jones
Assuming the 90 days trading horizon Africa Oil Corp is expected to under-perform the Dow Jones. In addition to that, Africa Oil is 3.32 times more volatile than Dow Jones Industrial. It trades about -0.02 of its total potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.12 per unit of volatility. If you would invest 3,624,550 in Dow Jones Industrial on August 27, 2024 and sell it today you would earn a total of 805,101 from holding Dow Jones Industrial or generate 22.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.6% |
| Values | Daily Returns |
Africa Oil Corp vs. Dow Jones Industrial
Performance |
| Timeline |
Africa Oil and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Africa Oil Corp
Pair trading matchups for Africa Oil
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Africa Oil and Dow Jones
The main advantage of trading using opposite Africa Oil and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Africa Oil position performs unexpectedly, Dow Jones can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Dow Jones will offset losses from the drop in Dow Jones' long position.| Africa Oil vs. Gear Energy | Africa Oil vs. Journey Energy | Africa Oil vs. Headwater Exploration | Africa Oil vs. Frontera Energy Corp |
| Dow Jones vs. MI Homes | Dow Jones vs. Franklin Street Properties | Dow Jones vs. Summit Hotel Properties | Dow Jones vs. Portillos |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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